Canadian “patent troll” Wi-Lan loses East Texas trial

Trial loss results in a steep drop in stock price.

An Ottawa-based patent-licensing firm named Wi-Lan is one of several patent-licensing operations that claims to own patents relating to wireless Internet. Wi-Lan filed a lawsuit against 22 companies over Wi-Fi back in 2007. In 2010, the firm went to East Texas to sue others, claiming it owned patents critical to the data transmission standards in mobile phones. Later that year, it also sued anyone who makes cable modems.

Most patent cases settle, but a group of defendants in a Wi-Lan mobile phone case saw it through to trial, resulting in a defense win against Wi-Lan that had immediate financial results for the company, which trades on NASDAQ as WILN. The patent-holding company lost about a third of its stock value after the verdict was announced Monday afternoon, but it has since made a partial recovery.

The defendants at the six-day trial were Alcatel-Lucent, Ericsson, HTC, and Sony; LG Electronics was also sued, but the docket shows LG settled with Wi-Lan in 2010. Court records indicate that the jury took just about one hour to decide the case. The verdict form shows that none of Wi-Lan's patents in this case were found to be infringed, and three of them were found to be invalid because they were anticipated by earlier technology or were just obvious.

“HTC believes that Wi-Lan has exaggerated the scope of its patent in order to extract unwarranted licensing royalties from entities who have been focused on bringing innovation forward in their own products,” a spokeswoman for Taiwan-based HTC toldBloomberg. "We think this validates our belief that Wi-Lan was stretching the boundaries of its patents, and the jury confirmed that belief,” said an Alcatel-Lucent spokesman.

Alcatel-Lucent is a company that has been on both sides of East Texas patent lawsuits. While it beat a "patent troll" in this case, the French telecom has also sued an array of US retailers in the same patent-happy district using patents it acquired from Bell Labs. Alcatel lost that case on appeal earlier this year, and its pursuit of a patent case in a market it didn't compete in earned it the moniker of "corporate troll" from victorious defendant Newegg.

Today's loss for Wi-Lan is hardly a wipe-out for the company, which boasts a portfolio of 3,000 patents. Still, one analyst who follows the company lowered his estimate of what these defendant companies would be paying Wi-Lan by a cool $12 million.

Wi-Lan can appeal the loss to the US Court of Appeals for the Federal Circuit and is likely to do so. But non-practicing patent holders haven't been faring well there lately.